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Regressive "Progress"

Should Grant County really tax the poor to build a multiplex?

 

Given the dismal track record of "economic development" in Grant County (see: Stream call center), it's perhaps not surprising that the latest such brainstorm should take the form of a tax increase. Those of you who passed Econ 101 and are already shaking your heads may be dismissed now, but others may want to read on — because it gets worse.

The tax in question is the regressive and business-stifling gross receipts tax, which local governments mysteriously seem to view as magical free money (see: Spaceport tax). And the beneficiaries of this tax largesse would not be relocating manufacturers, other job creators or even another call center, but rather swimmers, baseball fans, moviegoers, conference attendees and golfers.

Moreover, a significant chunk of the money poached from minimum-wage workers when they purchase toilet paper, laundry soap or pet food would be funneled to Western New Mexico University. The funds would fix the WNMU pool and enable the university to bring back baseball as a team sport. When WNMU President Joseph Shepherd talked about engaging with the community when he arrived two years ago, we didn't realize there was a pricetag.

This $10 million proposal was devised by Shepherd, Grant County Commissioner Brett Kasten, Town Manager Alex Brown and the Gila Economic Development Alliance. On May 9, the County Commission passed a "Notice of Intent" to bring an ordinance for the tax increase to its June 13 meeting. No specific projects will be attached to the planned September vote on the tax hike. That of course lets voters imagine the best, in terms of funding for pet projects not included in the Gila EDA proposal — and gives no clear targets for opposition. Given the likely low turnout for a special election in an off-election year, the tax represents a $10 million blank check.

 

Each of the proposed uses of the funds no doubt has its merits. It would be nice to improve the paths at the golf course and spiff up the conference center (former home to Stream), and it's a shame the WNMU pool needs expensive repairs. It's true that the general community enjoyed the pool when it was open, and would benefit from a new community pool included in the $4.3 million pricetag. And the university would pick up the operating cost for both pools. But calling this "economic development" is baffling, unless somehow the plan is to convince Michael Phelps to move here and spend his millions in Grant County.

It's worth noting that the legislature turned down WNMU's request to fix the pool, when the pricetag was a mere $1 million. The latest plan adds eight inches to make the pool suitable for competition, as well as building a smaller community pool. But if the legislature doesn't think this is a good investment of tax dollars, why should local residents pick up the tab?

The $325,000 to $600,000 projected to add lighting and synthetic turf to the baseball field at Bataan Park would of course have benefits beyond helping WNMU restore men's baseball. The catch, however, is that Title IX would then require the university to add two women's sports: soccer and — you guessed it — swimming. So the repair bill for the pool really also helps the baseball team. And isn't there already money for the ballpark improvements — a legislative appropriation plus a loan to be paid back by the town from general operating funds?

Shepherd maintains that these improvements will help boost enrollment from 3,800 to 5,000. Besides the question of whether we really want more students attracted by having a pool rather than improved academics, shouldn't the state be paying for this growth? Or shouldn't WNMU students foot the bill through higher fees? (Shepherd, however, says only a single student has asked him about the closed pool — so much for fixing it as a driver of student recruitment.)

More puzzling still, however, is the plan to spend $4 million to build a movie "multiplex." As reported in last month's Borderlines column, Deming's experience in the multiplex business should prove cautionary on this notion. Besides, isn't the town of Silver City committed to putting a movie theater downtown in the renovated Silco Theater? Why should Grant County residents invest in competition for that project?

Labeling any of this "economic development" seems like a smokescreen for pushing various pet projects — any of which might have their own merits, but little of which include job creation.

 

The worst part about the plan is paying for these wish-list projects by boosting the gross-receipts tax, which is inherently regressive. Despite New Mexico's repeal of the tax on groceries, this tax still falls on everything from hardware to household supplies to shampoo — without regard for ability to pay. However small the quarter-percent increase, this proposal literally means a person below the poverty line will pay more for Kleenex or aspirin so that you or I can go swimming or watch the new Star Wars movies without leaving town.

Because of "pyramiding" and because it includes services, the gross-receipts tax also hurts businesses — especially small businesses. For example, a big company can afford to employ an accountant; when a small firm pays for accounting services, however, it must pay gross-receipts tax as well. This tax acts like a tiny but persistent vise, squeezing every purchase and investment a business makes.

Town Manager Brown claims that 40% of gross-receipts taxes are paid by visitors, not residents — a variation on the "free money" thinking. We find that statistic incredible, but even if it's true this presumes that visitors are somehow insensitive to cost. Keep making them pay more, whether through lodgers taxes or gross-receipts taxes, and eventually they'll go elsewhere.

Economic development? By its very nature, the gross-receipts tax is antithetical to economic development.

But it's only $1 on every $400 purchase, advocates will respond. True, but a quarter-percent here and a quarter-percent there and pretty soon you're paying 7.375%, the current rate in Silver City. That's already too high for a regressive, business-stifling tax. Officials should be looking for ways to lower that burden, not schemes to inch it even higher.

 

If these projects, which frankly mostly benefit the middle class, are worthy, the county should pay for them by raising property taxes. Homeowners are more likely to be able to afford to golf or go to the movies, so at least there would be some connection between cost and benefit. (Obviously, raising user fees should be the first resort, where appropriate.) At 17.538 mills (as of February 2012), Grant County's residential property tax rate is the lowest in our part of the state except for Catron County. It's only about two-thirds of Doña Ana County.

Not that we're advocating higher property taxes, especially given the fragile real estate recovery and the challenges of residents on fixed income. But officials pushing this smorgasbord of projects should at least propose a somewhat less-regressive way of paying for them. Then let's see if homeowners really think it's worth paying more to see Transformers 4 here instead of in Deming or Las Cruces.

We used to think it would be great if county, town and university officials could put their heads together and cooperate. Now we're not so sure.

 

 

 

David A. Fryxell is editor of Desert Exposure.

 

 

 

 

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